Paramount: streaming profit in sight amid programming cuts

Paramount now expects to achieve domestic profitability for its Paramount+ streamer in 2025 having passed what CEO Bob Bakish described as “peak streaming losses” a year earlier than expected thanks in part to price increases and the integration of Showtime into Paramount+.

The company is recalibrating its streaming programming strategy by cutting back on local-language programming internationally and focusing on “Hollywood hits” with broader appeal both in the US and overseas.

Paramount is also planning to cut programming costs more generally and is taking a “programming and restructuring charge” of about US$1 billion in the first quarter, of which about US$200 million will be accounted for by restructuring costs.

The comments about Paramount+’s prospects came as the company posted full-year revenues of US$29.7 billion, down 2%, of which streaming accounted for US$6.7 billion, up 37%. Adjusted OIBDA was US$2.4 billion, down 27% after what Bakish described as “a dynamic and in many ways a challenging year”. The company’s Q4 performance was hit by a 12% drop in revenue amid cable subscriber declines and a drop in advertising.

Warner Bros. Discovery pulls back

The results were announced after news filtered through of a decision by Warner Bros. Discovery not to proceed with a potential acquisition of Paramount. CNBC, citing unnamed sources, reported that WBD had decided not to move forwards after several months of mulling a potential deal, leaving David Ellison’s Skydance Media as the most likely contender for any agreement.

(On the recent WBD earnings call, CEO David Zaslav had said that “We do have optionality to look at other assets, but it’s going to be a very high bar for us” in relation to M&A.)

Bakish meanwhile batted away a question about mergers and acquisitions during the Paramount analyst call, and the focus was on Paramount’s strategy for progressing as a standalone entity.

“We’re focused on returning the company to sustainable profitable growth in 2024 and beyond and, regardless of current market sentiment, we’re convinced that the value of our assets today combined with the execution of our strategy as we move forward represents a significant value creation opportunity and we are dedicated to unlocking that value,” he said on the call.

Slower subscriber growth in 2024

Paramount+ added 4.1 million net new subscribers in the quarter, with CFO Naveen Chopra telling analysts that this represented “balanced” growth between domestic and international operations. Paramount+ revenue for Q4 jumped by 69% driven both by subscriber and ARPU growth.

Paramount expects slower D2C subscriber growth this year as its move to “dial back” on international content and churn in the wake of the Super Bowl kick in.

Chopra said Paramount would also look to exit some “hard-bundling” streaming partnerships where “quite frankly the economics just weren’t that compelling”, with the potential loss of about two million subscribers as a result of the latter move.

He said that while there would be a “little bit of noise in the subscriber trends”, this would not have “a material impact” on revenue or EBITDA.